CAFOs and the 2012 Farm Bill

The Farm Bill is one of the biggest sources of subsidies to the CAFO industry. The current bill is set to expire on September 30, 2012. There are a lot of different rumors going around about when we’ll have a new Farm Bill, what it will look like, and what it will mean for CAFO activists. We asked Martha Noble, an attorney and veteran policy specialist at the National Sustainable Agriculture Coalition, to lay out potential scenarios as the 2012 Farm Bill debate heats up. Martha’s essay “Paying the Polluters: Animal Factories Feast on Taxpayer Subsidies” appeared in the CAFO Reader and is available for download below.

Watershed Media: One of the biggest sources of subsidies to the CAFO industry is the Farm Bill. What is the timeline for the Farm Bill as we head into 2012?

Martha Noble: The 2008 Farm Bill expires September 30, 2012. Not surprisingly, congressional action on reauthorizing the Farm Bill in 2012 is complicated by the congressional fight over the federal budget issues and by the upcoming elections in November.

Late last year, the Senate and House Agriculture Committee chairs joined in a deal that would cut $23 billion over 10 years from the Farm Bill budget, an agreement that could have made the road to the next Farm Bill relatively smooth.

That deal has blown up. On March 29, the House passed a budget resolution to cut $3.5 trillion from the federal budget over 10 years. The resolution strips $179.4 billion from Agriculture Committee programs over the next 10 years ($29.3 billion from commodity programs, $134 billion from nutrition programs, and approximately $16.1 billion from conservation programs), nearly 8 times the amount the Agriculture Committees agreed upon.

Additionally, the budget includes “reconciliation” instructions that require the House Agriculture Committee to figure out how to cut $33.2 billion of total agriculture cuts by April 27 of this year.

So, the House Agriculture Committee will need to determine how to proceed when it returns from the April recess. The Committee could ignore the budget cuts requested in the budget resolution and could then work on a Farm Bill budget with cuts somewhere between the Agriculture Committees’ proposed $23 billion and the Budget Resolution’s recommended $33.2 billion, with cuts likely to be on the higher side. This scenario is unlikely.

On the Senate side, there is no similar proposal of budget cuts. Senate Agriculture Committee Charman Debbie Stabenow (D-MI) is aggressively proceeding with a bill anticipating about $23 billion in cuts over 10 years. She is aiming to get the bill approved by the Senate Agriculture Committee by Memorial Day and looking to a June vote on the Senate Floor. If she is successful, the House Agriculture Committee could take up the Senate bill, make changes, and get House approval. Differences in the House and Senate bills would be resolved, and a final bill approved, either in the lead-up to the election in November, or immediately following it.

But with the radically different House and Senate positions on the budget, this course of events is by no means certain. If there is no Farm Bill reauthorization, then Congress will need to act before September 30 to extend the Farm Bill, with or without changes. The most likely path forward would be a one-year extension.

WM: We hear a lot from commodity growers about the need for a strengthened crop insurance program rather than subsidies. What are the differences between commodity subsidies and crop insurance?

MN: The federal crop insurance program provides farmers with risk management tools. The program insures against both revenue and crop yield losses. About 75 percent of all policy premiums go towards revenue losses and 25 percent go towards crop yield losses. Federally subsidized policies protect producers against losses during a particular season, with price guarantee levels established immediately prior to the planting season. The federal government pays about 60%, on average, of the farmer’s crop insurance premium. The federal government also pays some administrative costs and acts as a reinsurer for a selected group of crop insurance companies.

This is in contrast to commodity programs, where protection levels are specified in statute or use average farm prices from previous years. When commodity prices are high, there is no payout to farmers from these programs, whereas the government subsidizes crop insurance regardless of commodity prices. In addition, the commodity programs include a “direct payment” tied to land where commodity crops were historically produced (base acres). This program is no longer tied to production of commodity crops – you don’t have to farm in order to get paid – and is paid out without regard to the market price of crops. Direct payments, totaling around $5 billion annually, will likely be terminated in the next Farm Bill.

Federal crop insurance has grown in importance as a farm risk management tool since the early 1990s, due in large part to substantial federal subsidy intervention. As participation in crop insurance programs has grown over time and with higher market value for many commodity crops, the absolute level of federal premium subsidies has increased. The Congressional Budget Office estimates that the crop insurance program in its current form would cost, on average, $8.9 billion per year through 2022.

(For more information, see “Previewing the Next Farm Bill,” Ralph M. Chite, Congressional Research Service, February 15, 2012 here)

WM: Conservationists worry that replacing commodity payments with crop insurance will have even more impacts on the land. Is this true?

Losses due to crop failure in the Great Plains and Deep South have become so common that farmers now depend on crop insurance as part of the farm “safety net.” This is compounded by a big expansion of crop production into areas formerly left untouched as landowners cash in on the corn ethanol boom.

The conservationists’ fear of environmental impacts under crop insurance stems from the fact that conservation compliance was decoupled from the program in the 1996 Farm Bill. Conservation compliance required that crops could not be grown on highly erodible lands (sod busting) and that draining wetlands (swamp busting) was prohibited. Commodity programs and other Farm Bill benefits are still tied to conservation compliance.

Reform groups like the National Sustainable Agriculture Coalition are calling for conservation compliance measures, as well as disincentive programs that limit the provision of crop insurance on native grasslands that are converted to crop production.

WM: What is the status of public funding for methane digesters?

MN: Methane digesters that capture potent greenhouse gasses from stored liquid manure can be beneficial on a small-scale. Some digesters are particularly valuable as a solution to seasonal livestock waste problems when applying manure directly to fields is not possible. But the current trend is to reward large mega-dairies with funding for methane digesters at taxpayer expense with highly questionable benefits over the long haul.

Nearly a half a dozen USDA programs currently aid in the establishment of methane digesters, even though the track record in terms of economic payback, electricity generation, and real elimination of waste problems is very questionable. Over $20 million was spent on methane digesters alone in the Rural Energy for America Program during the 2008 Farm Bill. And that’s only one of many programs. Taxpayer support of methane digesters should do more than improve the public image of mega CAFOs.

WM: The 2008 Farm Bill called for reforms in the livestock sector to curtail monopolistic behavior of large meatpacking firms? Has there been any change in that regard?

MN: Very little change at all regarding monopolistic behavior. A series of listening sessions on livestock competition was held in 2010 with the Department of Justice and USDA. USDA did as much as they could with the proposed Grain Inspection Packers and Stockyards Association (GIPSA) rule but the large meatpackers did all they could to defeat it. The proposed changes might eventually result in some fairer contract terms for poultry and hog producers, but the rule did not deal with larger antitrust and market concentration issues for independent livestock producers. Large-scale meat and poultry processors have few checks on using their market power to manipulate prices.

WM: Ethanol subsidies are going to be phased out in early 2012. Do you think this signals a change in subsidies to all of agriculture?

MN: No – the big players pushing for cuts in ethanol subsidies are large-scale poultry companies and livestock operations that are heavily dependent on purchased feed grains, especially corn. The ethanol subsidy diverts corn to ethanol production. We may see changes in the structure of some subsidy programs but we are still going to have to fight to get payment limitations and effective engaged-in-farming rules.

With the trend to subsidize commodities through crop insurance, we are on the verge of having a bill that gives the biggest operations even more funds than the commodity subsidy programs did. There are no payment limitations or other measures to control the amount of crop insurance subsidy going to a single farming operation.

The National Sustainable Agriculture Coalition will continue to work for payment limitations and more strict eligibility requirements in the next Farm Bill.

WM: What are the main initiatives you'll be taking on this year with respect to the CAFO issue?

MN: We are working on a measure to increase the number of state inspected meat and poultry facilities that are used by smaller independent livestock and poultry producers. Our work will be focused on getting better terms and support for alternative producers through the Farm Bill.

We also want to see further restrictions on funding of CAFO infrastructure in the Farm Bill’s conservation and energy programs and more attention given to intensively managed rotational grazing and other pastured based systems for raising livestock and poultry.

See the CAFO Reader chapter "Paying the Polluters: Animal Factories Feast on Taxpayer Subsidies" by Martha Noble (pdf)

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